Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q. What are the tax benefits for starting a forestry operation on my estate in Scotland?
A. There are several tax incentives for land owners in Scotland who establish a commercial forestry business, according to Pat Snowdon, the head of the economics and woodland carbon code unit at Scottish Forestry, the government agency responsible for forestry policy, support and regulation.
More: What Taxes Can a Buyer Expect When Purchasing a Home With Bitcoin?
“These tax benefits have been in place for about 30 years and they are part of the toolkit, if you will, that supports investment in the forestry sector,” he said.
For starters, there are no income or corporation taxes on the profit realized through timber sales, Mr. Snowdon noted.
“Also, such schemes are exempt from capital gains tax—not on the land, but on the value of the timber crop as it grows,” he said.
That means the gain in value of the commercial tree crops will not be subject to the tax, but growth attributable to the land would incur a levy.
There’s also an exemption for owners of forestry operations when it comes to inheritance tax, although the land must have been held by the owner of the estate for at least two years, Mr. Snowdon explained.
“If death occurs within the first two years of ownership, the [inheritance tax] liability can ordinarily be paid over 10 years in interest free installments,” according to a guide to forestry taxation published by the organization.
The property is subject to Scottish Land and Buildings Transaction Tax at commercial rates.
The first £150,000 (US$207,575) of the purchase price is not taxed, and there’s a 1% charge on the amount of the cost between £150,001 and £250,000 and a 5% levy on the portion of the price above £250,000, according to Revenue Scotland, the agency responsible for the collection and management of country’s taxes.
Email your questions to editors@mansionglobal.com. Check for answers weekly at www.mansionglobal.com.
Click to Read Tax Experts Share Answers and Advice for Readers’ Pressing Tax Questions